By now, you’ve surely heard about the CARES Act and the multitude of programs designed to help small businesses head off economic crisis as a result of the Coronavirus pandemic.
Though new legislation and relief packages have been signed into law, the aid they provide is not instantaneous. Like anything else in life, there is a process. And because this is new ground for many businesses – and lenders (not to mention the government armature that has to be put in place to support all these changes), there can be delays and confusion.
This story is derived mainly from the Small Business Administration resource at www.sba.gov, with some insight from tile contractors and law firms. It’s a simplification of the more detailed information you can find at the website to give you an idea of what these loans are, who they are meant for, how they help, and how to access them.
The URL that will take you to the SBA comprehensive site for all option is https://www.sba.gov/funding-programs/loans/coronavirus-relief-options. From there, we give you an overview of what is offered.
Economic Injury Disaster Loan Emergency Advance
What does it do? Provides up to $10,000 of economic relief for businesses experiencing temporary difficulties
Who’s eligible? Small business owners in all U.S. states, Washington D.C., and territories. This includes:
- small business with fewer than 500 employees (including sole proprietorships, independent contractors and self-employed persons),
- private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19.
- Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries. Visit https://www.sba.gov/document/support–table-size-standards for tables and tools to determine business size.
- A cooperative with not more than 500 employees.
- An Employee Stock Ownership Plan (ESOP), as defined in 15 U.S.C. 632, with not more than 500 employees.
- A tribal small business concern, as described in 15 U.S.C. 657a(b)(2)(C), with not more than 500 employees.
- A business, including an agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative, that is small under SBA Size Standards found at https://www.sba.gov/size-standards
- A business with more than 500 employees that is small under SBA Size Standards found at https://www.sba.gov/size-standards
- A private non-profit organization that is a non-governmental agency or entity that currently has an effective ruling letter from the IRS granting tax exemption under sections 501(c),(d), or (e) of the Internal Revenue Code of 1954, or satisfactory evidence from the State that the non-revenue producing organization or entity is a non-profit one organized or doing business under State law, or a faith-based organization.
- Be aware that this loan is capped at $1,000 per employee.
Where do I apply? https://covid19relief.sba.gov/#/
How long will it take me to fill out an application? 2 hours 10 minutes
How soon can I obtain funds? Claims are 3 days, but it is so new, very little information is available as to how long it actually takes to obtain funds.
How long do I have to apply? September 30, 2020
Is this loan forgivable? This loan advance will not need to be repaid.
Paycheck Protection Program
Where can I find it? https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp
What does it do? This SBA loan helps businesses keep their workforce employed for eight weeks during the Coronavirus crisis.
- Any small business with fewer than 500 employees (including sole proprietorships, independent contractors and self-employed persons), 501(c)(3) non-profit organizations, 501(c)(19) veterans organizations, or Tribal businesses (see sec. 31(b)(2)(C) of the Small Business Act) affected by Coronavirus/COVID-19.
- Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
- Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ fewer than 500 workers.
Where do I apply?
- For best results, check with your local lender first. Any SBA 7(a) lender, or any federally-insured depository institution, federally-insured credit union, and Farm Credit System institution that is participating can service this loan. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
- You can start preparing the application you will submit to your lender by using the application form at https://www.sba.gov/document/sba-form–paycheck-protection-program-borrower-application-form.
How long do I have to apply? Lenders may begin processing loan applications as soon as April 3, 2020. The Paycheck Protection Program will be available through June 30, 2020, but due to finite funds, it’s best to apply as soon as possible. Independent contractors and self-employed individuals can apply starting April 10.
How soon can I obtain funds? Anywhere from 10 – 30 days.
Is this loan forgivable? SBA will fully forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. At least 75% of the loan must be used for payroll. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
What is the maturity and interest rate of the loan? This loan has a maturity of 2 years and an interest rate of 1%.
Additional loans you may want to consider include:
SBA Express Bridge Loan
What does it do? It enables small businesses that currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly.
Why might I need it? It can help overcome temporary loss of revenue small businesses are experiencing or it can satisfy the need for urgent cash while applying for a direct SBA Economic Injury Disaster Loan.
Is it forgivable? It will be repaid in full or in part by proceeds from the EIDL.
SBA Debt Relief
What is it? A financial reprieve to small businesses during the COVID-19 crisis
What does it do?
- The SBA will automatically pay the principal, interest, and fees of current 7(a), 504, and microloans for a period of six months.
- The SBA will also automatically pay the principal, interest, and fees of new 7(a), 504, and microloans issued prior to September 27, 2020.
Automatic payment deferment
What is it? SBA is providing automatic payment deferments through December 31, 2020 for current SBA Serviced Disaster (Home and Business) Loans if they were in regular servicing status on March 1, 2020.
How do automatic deferments benefit me? Though interest will continue to accrue on the loan, monthly payment notices will reflect the loan is deferred and no payment is due.
What about automatic debit payments on the loan? The deferment will not cancel any established Preauthorized Debit (PAD) or recurring payments on the loan. Borrowers that have established a PAD through Pay.Gov or an OnLine Bill Pay Service must cancel these recurring payments. Borrowers that had SBA establish a PAD through Pay.gov must contact their SBA servicing office to cancel the PAD.
What if I want to keep paying on the loan? If you wish to continue making payments during the deferment period, you may and they will be applied normally. Once the automatic deferment period ends, borrowers will need to resume their regular payment schedule, and those who cancelled recurring payments will need to reestablish them.
Where do I go for questions? Please contact your Loan Servicing Office directly using the following information:
- Birmingham Disaster Loan Servicing Center:
- Phone: 800-736-6048
- Email: [email protected]
- El Paso Disaster Loan Servicing Center:
- Phone: 800-487-6019
- Email: [email protected]
Stay tuned for ongoing information about programs that can benefit small businesses and workers as we move through this pandemic together. And visit www.tile-assn.com for regularly updated resources to help businesses and workers affected by COVID-19.